Analysts predict a strong 2013 for United

Friday, December 21, 2012

Relative labor harmony, an improving balance sheet, a dominant global network and a full integration with Continental Airlines are some of the reasons analysts with Dahlman Rose & Co. see a strong 2013 for United Continental Holdings, the parent company of United Airlines.
The analysts contend that United has one of the strongest domestic networks and is a major player in Asia and Latin America. As a founding member of Star Alliance, it also has an entree into Russia and Africa. These lanes will be bolstered by the planned addition of 50 Boeing 787 Dreamliners. In addition, services on these lanes are anticipated to run smoothly next year.
“United had several operational missteps in 2012, which resulted in weak earnings results,” the Dahlman Rose analysts wrote. “We believe the company has turned the corner with improved on-time arrivals and higher completion factors.”
Labor negotiations won’t enter into the picture next year, as United has reached agreements with all of its major unions. There are still changes to be made to various contracts, but the agreements can’t be amended until 2014 at the earliest, giving United and the unions a large negotiating timetable and ensuring a little bit of stability on that front.
The analysts remain convinced that United’s balance sheet is only getting stronger. The airline is paying down debt with cash on hand and will continue to do so for the next five years. This strategy has led to a lower interest expense for the company.
In the third quarter, United showed total revenue of $9.9 billion, a 2.6-percent year-over-year decrease. Cargo and other revenue came in at $1.1 billion, a 2.3-percent year-over-year drop.
“This was a challenging quarter for our team, but we continued to build a solid financial foundation for our future,” United’s John Rainey said at the time. “We made progress strengthening our balance sheet, managing our costs and making the right long-term investments that will contribute to our goal of generating returns in excess of our cost of capital.” - Jon Ross